I am 55 years old and in excellent health. I’ve been running my own firm for 29 years and have recently begun to give ownership to a handful of long-time employees. Recently my team has been coming to me asking me about succession planning. I don’t have a plan other than to gift ownership, as earned, to my team over time.

I don’t see myself retiring. I don’t want to stop working unless health forces me to do so. I have two children in their mid 20s; one is finishing graduate school and the other works on Wall Street. They could take over my firm if need be. I resent my team inferring that I don’t have a plan or haven’t shared one with them. Is there a polite way to tell them to back off?

R.

Dear S.R.,

Rather than asking them to back off, have you considered sharing the plan you do have in place with your two children? This sounds like a succession plan you’ve thought through. You don’t say if your children are also aware of this plan and if they have agreed to step in if need be. It seems to me the underlying problem may not be the plan itself, your willingness to retire or not retire or the employees’ concerns, but rather a void in communication from you about what you have considered and what you plan for the future.

Even if you expect to work for decades, and I wish you good health in doing so, every business needs to have some sort of plan in place for incapacitation of the leader. God forbid you are in a car accident, or have a health scare or your spouse or one of your children gets sick. You want to know the firm is protected and can carry on without a serious disruption no matter what happens to you.

Start with a contingency plan, not a succession plan – one considers life insurance as a protective measure but not the long-term goal. It would help to formalize your plans. Sit down with your children if they are the first option and be sure they are in agreement with your thinking and would be ready to step in if necessary. I understand they are family but this makes it even more important to get things in writing so everyone knows where they stand. Will one of the children be the President or primary leader? Will they have different duties? Do both have to step in or can it be whichever one has the best possibility at the time of doing so. There are many considerations and you need to hammer these out, get them in writing and have both children sign.

If your children aren’t willing to do this, is there someone on your team who could step into the leadership role if need be? You are giving away ownership so I assume you have some long term people who know the firm and whom you can trust. Could someone be the “go to” if need be? Again, be sure to hammer out details of this and get everything in writing and signed.

These could both be short-term options if a disastrous situation befell you. Once you have the plan in writing, communicate it to your team. Let them know you honor their concerns and you want to affirm you are taking steps to protect them, and the firm overall. Be as transparent as possible so they know how the plan will work.

Lastly, consider succession planning if your children are not going to be there for the long term, or you don’t have a team member who can step into leadership. While you may work into your 80s or 90s (Warren Buffett is still going strong!) in good health, you may also decide you want to pull back a little bit and take your foot off the gas. To do this, you’ll need an infrastructure in place to support you.

Dear Bev,

With the pending DOL fiduciary rule, do you believe it is still an advantage for a Registered Investment Advisor to say we are independent and objective? Our competition is now going to be doing what we do. I’m unsure of whether this change benefits our business or could detract from it. Your thoughts?

John T.

Dear John,

While I’m not a huge proponent of over-regulation and over-legislation, I’m not sure I see a major downside to a rule that insists retirement firms are acting in the investor’s best interest. I realize there are financial impacts in many cases and I work with many firms that are trying hard to figure out how to best integrate this proposed new rule. There are many considerations and making any change of this nature can be a hardship on the financial firms affected.

That said, the term “fiduciary” is not well understood outside of our industry. Do investors really choose your firm, or any independent RIA because of the fiduciary standard? I would argue they choose you because you have done a good job showing them what you can do for them, and how. You might have been able to explain fee-based pricing and show them the difference between this and a commissioned approach. You probably have a great story to tell, but I don’t know that fiduciary is at the heart of it. I hear RIA’s and independent advisors use this quite a bit as a differentiator, but I don’t believe I have ever heard someone say they won a new client on this basis. Most investors are not that well educated about the nuances.

Make sure you are telling a clear, well-differentiated story no matter what regulations or rulings may come down. Don’t waste your time trying to explain the concept of fiduciary; it doesn’t buy you much. Instead focus on The Client Experience – what’s it like to work with your firm? What can a client expect? What process do you use with them? How can you be transparent about what you do and how you do it? Your basic story – if compelling – will stand the test of time even if the competition starts doing similar things.

Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).

She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.